Discovery Bank’s new home loan product has taken off with data showing that clients have switched more than R650m of their mortgages.
Discovery, the holding company of Discovery Bank, in its year to end-June results said the lender’s home loan product had met expectations with clients having disbursed R776m worth of loans in the pipeline, with the vast majority of clients switching banks, while just R113m of this is made up of new loans.
Discovery Bank in May said based on reported balances of home loans held by SA’s big banks, a 1% saving on interest rates — which is at the heart of its new home loan product — will save consumers R12bn a year, a proposition it hopes will allow it to make inroads in the competitive market and snatch clients from rival banks.
In the year under review, the lender reported a 29% surge in retail deposits to R18.5bn, while advances grew 27% to R6.6bn.
The fledgling bank narrowed its losses in the period to R454m, from R767m in the previous year. The bank, launched in 2019 has been reducing its losses since its formation. It reported an operating loss of R1.2bn in 2020, R1bn in 2021 and R990m in 2022.
The bank, which has breached the 1-million clients mark was now targeting a profit of R3bn by financial year 2029.
Discovery group CEO Adrian Gore said the profit target was not a pipe dream. “The bank has been a tremendous success. We are comfortable about how it will continue gaining market share with quality clients. Our profit projection is a bottom-up calculation.”
Discovery has reported a 12% rise in annual attributable profit as new business grew 18%, boosted by a strong performance from Discovery SA and Vitality Global.
The group grew normalised profit from operations by 17% to R11.5bn in the year to end-June, with strong contributions from Discovery SA and Vitality Global, increasing 16% and 57%, respectively, it said in a statement on Thursday.
Vitality UK’s contribution to earnings declined 14%.
Normalised headline earnings grew 15% to R7.3bn while headline earnings increased 7% to R7.2bn, the difference due to the considerable fair value gain from the UK interest rate swaption in the previous period. The swaption was realised towards the end of the previous financial year, with no effect on profit in the period under review. Consistent with reporting, headline earnings were normalised for this, it said.
Core new business annualised premium income was up 18% to R26.7bn. Headline earnings per share (HEPS) was 7% higher at 1,089.4c and normalised HEPS was up 14% to 1,108.6c. A final cash dividend of 152c per share was declared.
Discovery SA performed strongly, with a compelling contribution from each business in the composite, with Discovery Bank exceeding expectations and good progress across all metrics, the group said. The acquisition of quality clients continued to accelerate, resulting in strong revenue growth.
Discovery Life delivered robust earnings, despite the result for Group Life being elevated in the year-earlier period. Discovery Health generated solid earnings growth, while continuing to invest in technology, innovation and artificial intelligence (AI).
Discovery Invest delivered strong profit growth due to an increase in the value of assets under management, while Discovery Insure delivered a strong recovery in the second half, as prior period management actions took effect.
Vitality UK achieved strong growth in customers, new business and earned premiums. Vitality Health’s membership reached 1-million during the reporting year, having grown strongly from the increased demand for private medical insurance, given the backlogs experienced by the National Health Service.
Vitality Global delivered exceptional performance over the year, Discovery said.
Ping An Health Insurance delivered an excellent operating result, with a reduction in the combined ratio, and strong cash generation. Vitality Network generated strong profit and membership growth, with improving margins.
Vitality Health International represented a growth area for the group. Discovery had built two international businesses of scale in Vitality UK and Vitality Global. Each had developed at a different pace, given the prevailing considerations for each, it said.mackenziej@arena.africa
Updated: September 19 2024
This article has been updated throughout with additional information
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